Dr. Lake also founded an internationally recognized calibration and testing laboratory accreditation body. Dr. Lake, age 68, has served as a Director of the Company since 1975.
Dr. Lake spent his early career in the steel industry with Youngstown Sheet and Tube and National Steel holding a variety of management positions, including Director -— R&D and Corporate Quality Manager, before founding SRI. He has a Ph.D. degree in Metallurgical Engineering and has international quality management systems experience. His financial experience and analytical expertise are applicable to benefits plan investment management.
Rick R. Tayloris President of Jay Industries, a Tier 1 automotive parts manufacturer. Jay Industries also is a Tier 2 parts manufacturer for several other industrial companies. In addition, Mr. Taylor is President of Longview Steel Corporation, a steel wholesaler. Mr. Taylor has been a Director of Park National Corporation, a NYSE publicly traded regional bank holding company, since 1995; he serves on the Investment Committee. Mr. Taylor, age 63, has served as a Director of the Company since 2003.
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Mr. Taylor’s major-companymajor company manufacturing experience spans 40 years. He has extensive international supply chain experience, and board of directors’ experience, including investment management.
W. Wayne Walstonhas been a partner ofin the Warsaw, Indiana office of Beers Mallers Backs & Salin, LLP (attorneys) since November, 2008. Prior to that, Mr. Walston was a partner ofin Miner Lemon & Walston, LLP from January 2007, and owner of the Walston Elder Law Office from July 2003 through December 2006. Mr. Walston previously was an officer of Sprint Corporation for 14 years as Legal and External Affairs officer; he also served as Secretary to the Board of Directors of five separate state operating entities. Mr. Walston, age 68, has served as a Director of the Company since 1999.
Mr. Walston has extensive experience with labor and employment relations, antitrust compliance, Securities and Exchange Commission compliance, state regulatory compliance for public utilities, legislative and regulatory advocacy, real estate contracts and transactions, corporate communications and corporate litigation. He also has extensive major publicly-held company board of directors’ experience, including corporate governance.
Additional Director Nominee Information
Involvement by Mr. Hoaglin in Certain Legal Proceedings —On June 2, 2005, Huntington Bancshares, Inc. (“Huntington”) announced that the Securities and Exchange Commission (“Commission”) approved the settlement of the Commission’s previously announced formal investigation into certain financial accounting matters relating to Huntington’s fiscal years 2002 and earlier and certain related disclosure matters. As a part of the settlement, the Commission instituted a cease and desist administrative proceeding and entered a cease and desist order, as well as filed a civil action in federal
6
district court pursuant to which, without admitting or denying the allegations in the complaint, Huntington, its former chief financial officer, its former controller, and Mr. Hoaglin consented to pay civil money penalties. Huntington consented to pay a penalty of $7.5 million. Without admitting or denying the charges in the administrative proceeding, Huntington and the individuals each agreed to cease and desist from committingand/or causing the violations charged as well as any future violations of the Commission’s regulations. Additionally, Mr. Hoaglin agreed to pay disgorgement, pre-judgment interest, and penalties in the amount of $667,609. The former chief financial officer and the former controller each also agreed to pay amounts consisting of disgorgement, pre-judgment interest, and penalties and also consented to certain other non-monetary penalties.
BOARD OF DIRECTORS AND DIRECTORS’ COMMITTEESCORPORATE GOVERNANCE
Board of Directors and Board Committees
The Company requires that a majority of its Directors must be “independent” as required by the listing standards of the NYSE Amex Exchange and the Securities and Exchange Commission (SEC) rules, or by other regulatory or legislative bodies as may be established. The Board, on an annual basis, makes a determination as to the independence of each Director in accordance with these prescribed rules or regulations. In general, “independent” means that a Director has no material relationship with the Company or any of its subsidiaries. The existence of a “material” relationship must be determined upon a review of all relevant facts and circumstances, and generally is a relationship that might reasonably be expected to compromise the Director’s ability to maintain his or her independence from management.
Based on its review, the Board of Directors affirmatively determined, after considering all relevant facts and circumstances, that no Non-Employee Director has a material relationship with the Company and that all Non-Employee Directors meet the independence standards of the Company’s Corporate Governance Guidelines as well as the independence standards of the current NYSE Amex Exchange and SEC corporate governance requirements for listed companies.
During 2009,2010, a total of five regularly scheduled meetings of the Board of Directors (at least one each quarter), onetwo special meetingmeetings of the Board of Directors, and a total of 1420 meetings of all standing Directors’ Committees were held. All Directors attended at least 75% of the aggregate of the total number of meetings held by the Board of Directors and of the total number of meetings held by the respective committees on which they served. In 2009,2010, the “independent” Directors met onceat four of the five regularly scheduled meetings of the Board of Directors in executive session without the presence of the non-independent Directors and any members of the Company’s management.
The Board of Directors has four separately designated standing committees: (1) an Audit Review Committee, whose present members are Thomas E. Hoaglin (Chairman(Chair and “independent audit committee financial
7
expert”), Dr. Peter B. Lake and W. Wayne Walston; (2) a Compensation Committee, whose present members are W. Wayne Walston (Chairman)(Chair), M. Ann Harlan and Christopher H. Lake; (3) a Pension Committee, whose present members are Dr. Peter B. Lake (Chairman)(Chair), Rick R. Taylor and W. Wayne Walston; and (4) aGovernance and Nominating Committee, which succeeds the previous Nominating Committee, whose present members are M. Ann Harlan (Co-Chair), Christopher H. Lake (Chairman)(Co-Chair), M. Ann Harlan and Rick R. Taylor. All members of each committeeCommittee are independent Directors. Each committee is governed by a written charter adopted by the Board of Directors detailing its authority and responsibilities. These charters are reviewed and updated periodically as legislative and regulatory developments and business circumstances warrant. The Board Committees’ charters are available in their entirety on the Company’s website athttp://www.gormanrupp.com.
Audit Committee
The Audit Review Committee held six meetings in 2009.2010. Its principal functions include reviewing the arrangement and scope of the audit of the Company’s consolidated financial statements, considering comments made by the independent registered public accountants with respect to internal controls and financial reporting, considering corrective actionrelated actions taken by management, reviewing internal accounting systems, procedures and controls with the
8
Company’s internal auditor and financial staff, and reviewing non-audit services provided by the independent registered public accountants. Theaccountants, and organizational oversight of the Company’s enterprise risk management plan.
Compensation Committee is governed by a written charter adopted by the Board of Directors.
The Compensation Committee held threeeight meetings during 2009.2010. Its principal functions are, subject to approval by the Board of Directors, to evaluate, develop and monitor compensation policies and programs for the Company’s officers and Directors, and to recommend the salaries and profit sharing for the officers. (AA more comprehensive description of the Compensation Committee’s functions is set forth under the caption “Compensation Discussion and Analysis”.)
Pension Committee
The Pension Committee held four meetings in 2009.2010. Its principal functions are to monitor and assist in the investment of the assets associated with the Company’s defined benefit pension plan and 401(k) defined contribution plan.plan and to assist in evaluating recommended changes in such investments.
TheGovernance and Nominating Committee
To emphasize expanding corporate governance considerations in recent years, the Board of Directors recommended and approved the change of name of the previous Nominating Committee to Governance and Nominating Committee during 2010. The Governance and Nominating Committee
8
held one meetingtwo meetings during 2009.2010. Its principal functions involve the identification, evaluation and recommendation of individuals for nomination as members of the Board of Directors. MembersDirectors, succession planning for the Company’s Chief Executive Officer and other Executive Officers, succession planning for other corporate officers and key operating executives, and periodic review of the Nominating Committee are “independent” in accordanceBoard Committees’ charters and Corporate Governance Guidelines for compliance with Section 803A of the listing standards of the NYSE Amex Exchange.evolving regulations and Board-desired corporate goals.
The Governance and Nominating Committee does not have a written charter but followsincorporates the Company’s policies and procedures by which to consider recommendations from shareholders for Director nominees. (These written policies and procedures were recommended by the Committee and adopted by the Board of Directors for the Committee in 1991.) Any shareholder wishing to propose a candidate should deliver a typewritten or legible hand-written communication to the Company’s Corporate Secretary. The submission should provide detailed business and personal biographical data about the candidate, and include a brief analysis explaining why the individual is well-qualified to become a Director nominee. All recommendations will be acknowledged by the Corporate Secretary and promptly referred to the Governance and Nominating Committee for evaluation.
The Governance and Nominating Committee does not believe that any particular set of skills, qualities or diversities areis most appropriate for a Director candidate. All Director candidates, including any recommended by shareholders, are first evaluated based upon their (i) integrity, strength of character, practical wisdom and mature judgment; (ii) business and financial expertise and experience; (iii) intellect to comprehend the issues confronting the Company; and (iv) availability of adequate time to devote to the affairs of the Company and attend Board and Committee meetings. The Governance and Nominating Committee also focuses on issues of diversity, such as diversity of gender, race and national origin, education, professional experience and differences in viewpoints and skills. New Director candidates are subject to a background check performed by the Committee. In addition, the candidate will be personally interviewed by one or more Committee members before he or she is nominated for election to be a new member of the Board of Directors. In considering candidates for the Board, the Governance and Nominating Committee considers the entirety of
9
each candidate’s credentials in the context of their skills, qualities or diversities. With respect to the nomination of continuing Directors for re-election, the individual’s historical contributions to the Board are also considered.
Risk Management and GovernanceOversight
The Board of Directors believes that control and management of risk are primary responsibilities of senior management of the Company. As a general matter, the entire Board of Directors is responsible for oversight of this important senior management function. The Audit Committee is responsible to the Board for the organizational oversight of the Company’s comprehensive enterprise risk management plan. Additional oversight of some risks is performed by specific Board committees, e.g., financial reporting risks are overseen by the Audit Review Committee, benefit plan investment risks are overseen by the
9
Pension Committee, personnel selection, evaluation, retention and compensation risks are overseen by the Compensation Committee, and Chief Executive Officer, Executive Officer, other corporate officer, key operating executive and Director succession planning risks are overseen by the Governance and Nominating Committee; the results of their oversight are reported to the entire Board of Directors.
Compensation Risks
The Company believes its reliance on profit sharing for its only added incentive compensation for substantially all employees, including all management and officer personnel, creates the least amount of risk of any material adverse effect on the Company’s financial results.
Director’s CompensationLeadership Organization
Directors who are employees of the Company (Messrs. J. C. Gorman and J. S. Gorman) do not receive any compensation for service as Directors.
The Board of Directors has determined that all Non-Employee Directors (Ms. Harlan and Messrs. Hoaglin, C.H. Lake, Dr. P. B. Lake, Taylor, and Walston) are “independent” Directors in accordance with Section 803A of the listing standards of the NYSE Amex Exchange. Non-Employee Directors are compensated by the Company for their services as Directors.
The table below summarizes the total compensation paid for service of each of the named Non-Employee Directors of the Company for the calendar year ended December 31, 2009.
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Director Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Change in
| | | | |
| | | | | | | | | | | Pension Value
| | | | |
| | | | | | | | | | | and
| | | | |
| | | | | | | | | | | Nonqualified
| | | | |
| | | Fees
| | | | | | Non-Equity
| | Deferred
| | | | |
| | | Earned or
| | Stock
| | Option
| | Incentive Plan
| | Compensation
| | All Other
| | |
| | | Paid in
| | Awards
| | Awards
| | Compensation
| | Earnings
| | Compensation
| | |
Name | | Cash(1) | | (2) | | ($) | | ($) | | ($) | | ($) | | Total |
| |
| M. Ann Harlan | | $ | 8,263 | | | $ | 10,240 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 18,503 | |
| Thomas E. Hoaglin | | | 18,063 | | | | 10,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 28,303 | |
| Christopher H. Lake | | | 16,263 | | | | 10,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 26,503 | |
| Peter B. Lake, Ph.D. | | | 18,488 | | | | 10,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 28,728 | |
| Rick R. Taylor | | | 15,763 | | | | 10,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 26,003 | |
| W. Wayne Walston | | | 19,912 | | | | 10,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 30,152 | |
| | |
(1) | | Each Non-Employee Director receives a fee for each of the Board of Directors meetings attended. Fees were $2,750 for each meeting attended during 2009. Directors serving as members of Board Committees receive an additional fee of $500 for each Committee meeting attended that is held in conjunction with a meeting of the Board of Directors. Each Committee Chairman also receives a retainer fee of $1,000 per year. In support of the Company’s management and employees, substantially all of whom underwent compensation reductions for more than six months during 2009, the Non-Employee Directors, upon recommendation of the Compensation Committee, voted unanimously on October 22, 2009 to reduce all components of Director fees by 15%. This reduction remains in effect on the filing date of this Proxy Statement. |
|
(2) | | Effective May 22, 1997, the Board of Directors adopted a Non-Employee Directors’ Compensation Plan. Under the Plan, as additional compensation for regular services to be performed as a Director, an automatic award of 500 Common Shares (from the Company’s treasury) will be made on each July 1 to each Non-Employee Director then serving on the Board. (On July 27, 2006, the Board of Directors adopted a resolution extending the Non-Employee Directors’ Compensation Plan for an additional term until the earlier of (i) May 21, 2017, (ii) at such time as all of the Company’s Common Shares authorized for award under the Plan and registered underForm S-8 Registration StatementNo. 333-30159 shall have been awarded and issued, (iii) at such time as the Company deregisters any Common Shares not issued under the foregoing Registration Statement, or (iv) at such time as the Plan is terminated by action of the Board of Directors.) The award of 500 Common Shares made on July 1, 2009 had a market value of $10,240. |
|
| | Members of the Board of Directors are encouraged to attend the Company’s Annual Meeting of Shareholders. All Directors were in attendance at the Annual Meeting in 2009. |
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AUDIT REVIEW COMMITTEE REPORT
The Audit Review Committee has submitted the following report to the Board of Directors:
(i) The Audit Review Committee has reviewed and discussed the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2009 and the assessment of the Company’s internal control over financial reporting with the Company’s management and the Company’s independent registered public accountants;
(ii) The Audit Review Committee has discussed with the Company’s independent registered public accountants the matters required to be discussed by Statement on Auditing Standards No. 114 (Codification of the Statements on Auditing Standards, AU 380), as adopted by the Public Company Accounting Oversight Board;
(iii) The Audit Review Committee has received the written disclosures and the letter from the Company’s independent registered public accountants required by the Public Company Accounting Oversight Board Rule 3526 (Communication with Audit Committees Concerning Independence), and has discussed the issue of independence, including the provision of non-audit services to the Company, with the independent registered public accountants;
(iv) With respect to the provision of non-audit services to the Company, the Audit Review Committee has obtained a written statement from the Company’s independent registered public accountants that they have not rendered any non-audit services prohibited by the Securities and Exchange Commission rules relating to auditor independence, and that the delivery of any permitted non-audit services has not and will not impair their independence;
(v) Based upon the review and discussions referred to above, the Audit Review Committee has recommended to the Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2009, to be filed with the Securities and Exchange Commission; and
(vi) In general, the Audit Review Committee has fulfilled its commitments in accordance with its Charter.
Members of the Audit Review Committee are “independent” in accordance with Section 803A of the listing standards of the NYSE Amex Exchange. The Chairman is also an “independent audit committee financial expert” in accordance with Securities and Exchange Commission rules.
Based upon a recommendation of the Audit Review Committee, the Board of Directors adopted a written Charter for the Audit Review Committee on October 23, 2003 (replacing the previous Charter adopted on June 8, 2000). The Committee reviews and reassesses the adequacy of the Charter on an annual basis. The most recent amendment to the Charter was adopted by the
12
Committee and approved by the Board of Directors on October 23, 2008. The Charter (as amended) will again be set forth as an appendix to the Proxy Statement in 2012.
The foregoing report has been furnished by members of the Audit Review Committee.
| | | | |
/s/ W. Wayne Walston
| | /s/ Thomas E. Hoaglin
| | /s/ Peter B. Lake
|
W. Wayne Walston | | Thomas E. Hoaglin | | Dr. Peter B. Lake |
| | Chairman | | |
SHAREHOLDINGS BY NAMED EXECUTIVE OFFICERS*
| | | | | | | | | |
| | | | | Shared Voting
|
| | | Shares Owned
| | and
|
Name and Principal Position | | Beneficially | | Investment Power |
| |
David P. Emmens
Corporate Counsel and Secretary | | | 8,279 | | | | -0- | |
Wayne L. Knabel
Chief Financial Officer and Treasurer | | | 2,640 | | | | -0- | |
| | |
* | | The table sets forth information received from the executive officers as of February 1, 2010, and all amounts represent less than 1% of the outstanding shares. The shareholdings of James C. Gorman and Jeffrey S. Gorman are included under the captions “Election of Directors” and “Principal Shareholders”. |
COMPANY LEADERSHIP ORGANIZATION
Upon election of Mr. J.S. Gorman as Chief Executive Officer of the Company May 1, 1998, the Company separated the offices of Board Chairman and Chief Executive Officer because it believed this division more clearly delineated their respective responsibilities. This currently provides for the Chairman to focus on Board of Director responsibilities and for the Chief Executive Officer to focus on the Company’s executive, administrative and operating responsibilities. Given their respective service years with the Company, the Company believes this structure is most appropriate currently for conducting its business and its responsibilities to its employees, customers and suppliers, to its shareholders and directors,Directors, and to its community and other regulatory agencies.
1310
PRINCIPAL SHAREHOLDERSAUDIT COMMITTEE REPORT
The Audit Committee has submitted the following table sets forth information pertainingreport to the beneficial ownershipBoard of the Company’s Common Shares as of February 1, 2010 by James C. Gorman and Jeffrey S. Gorman, and as of December 31, 2009 by each other person known to the Company to own beneficially at least five percent of the outstanding Common Shares.
| | | | | | | | | | | |
| | | | | Number
| | | Percent of
| |
| | | | | of Shares
| | | Outstanding
| |
Name and Address | | Type of Ownership | | Owned | | | Shares | |
| |
| James C. Gorman | | Sole voting and investment power | | | 635,032 | | | | 3.80 | % |
600 South Airport Road
Mansfield, OH 44903 | | Shared voting and investment
power | | | 672,003 | | | | 4.02 | % |
| | | | | | | | | | | |
| | | Total | | | 1,307,035 | | | | 7.82 | % |
| | | | | | | | | | | |
| Jeffrey S. Gorman | | Sole voting and investment power | | | 560,116 | | | | 3.35 | % |
600 South Airport Road
Mansfield, OH 44903 | | Shared voting and investment
power | | | 331,006 | | | | 1.98 | % |
| | | | | | | | | | | |
| | | Total | | | 891,122 | | | | 5.33 | % |
| | | | | | | | | | | |
| Pioneer Investment Management, Inc.(1) | | Sole voting and investment power | | | 1,056,247 | | | | 6.30 | % |
60 State Street
Boston, MA 02109 | | Shared voting and investment
power | | | -0- | | | | — | |
| | | | | | | | | | | |
| | | Total | | | 1,056,247 | | | | 6.30 | % |
| | | | | | | | | | | |
| Invesco PowerShares Capital | | Sole voting and investment power | | | 1,504,482 | | | | 9.00 | % |
| Management LLC(2) | | Shared voting and investment | | | | | | | | |
| 1555 Peachtree Street NE | | power | | | -0- | | | | — | |
| Atlanta, GA 30309 | | | | | | | | | | |
| | | | | | | | | | | |
| | | Total | | | 1,504,482 | | | | 9.00 | % |
All Directors and
Executive Officers as a group (10 persons) | | | | | 2,301,987 | (3) | | | 13.78 | % |
Directors:
| | |
(1) | (i) | Pioneer Investment Management, Inc., an investment advisory business, is an indirect subsidiaryThe Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2010 and the assessment of UniCredit S.p.A.the Company’s internal control over financial reporting with the Company’s management and the Company’s independent registered public accountants; |
| |
(2) | (ii) | Invesco PowerShares Capital Management LLC is a subsidiary of Invesco Ltd.The Audit Committee has discussed with the Company’s independent registered public accountants the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; |
| |
(3) | (iii) | Includes 1,039,415 shares asThe Audit Committee has received the written disclosures and the letter from the Company’s independent registered public accountants required by the Public Company Accounting Oversight Board Rule 3526 (Communication with Audit Committees Concerning Independence), and has discussed the issue of independence, including the provision of non-audit services to which votingthe Company, with the independent registered public accountants; |
|
| (iv) | With respect to the provision of non-audit services to the Company, the Audit Committee has obtained a written statement from the Company’s independent registered public accountants that they have not rendered any non-audit services prohibited by the Securities and investment power are shared.Exchange Commission rules relating to auditor independence, and that the delivery of any permitted non-audit services has not and will not impair their independence; |
|
| (v) | Based upon the review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2010, to be filed with the Securities and Exchange Commission; and |
|
| (vi) | In general, the Audit Committee has fulfilled its commitments in accordance with its Charter. |
Members of the Audit Committee are also “independent” in accordance with the additional listing standards of the NYSE Amex Exchange, and the Chairman is an “independent audit committee financial expert” in accordance with Securities and Exchange Commission rules.
The foregoing report has been furnished by members of the Audit Committee.
| | | | |
/s/ Thomas E. Hoaglin
| | /s/ Peter B. Lake
| | /s/ W. Wayne Walston
|
Thomas E. Hoaglin,
Chair | | Dr. Peter B. Lake | | W. Wayne Walston |
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis
Overview
The Compensation Committee (the “Committee”) of the Board of Directors is authorized (i) to review and evaluate the compensation policies and programs for the Company’s Chief Executive Officer and its other officers (collectively, the “Officers”); (ii) to review, at least annually, the Chief Executive Officer’s progress assessments of the other Officers and to evaluate the Chief Executive Officer’s progress assessment; and (iii) to review and recommend the annual salaries and profit sharing determinations for the Officers to the Board of Directors.
Three independent Directors comprise the Committee. Their responsibilities are carried out pursuant to authority delegated by the Board of Directors and in accordance with the federal securities laws and other applicable laws and regulations. The Committee is not governed by a written charter.
In devising and maintaining the Company’s Officer compensation program, the Committee from time to time reviews generally available published data relevant to the compensation of officers in competitor companies that manufacture pumps and related fluid control equipment. Historically these reviews were not subject to a formal benchmarking process but in December 2007, following its review of the qualifications of several compensation consultants, the Committee engaged the services of Watson Wyatt Worldwide (“Watson”), an independent compensation consulting company. The Committee’s objectives were to establish an appropriate peer group for evaluating Officer compensation generally; complete a competitive assessment of pay levels for the Chief Executive Officer and Chief Financial Officer; and develop the structure of the compensation for the CEO and CFO positions including annual incentive opportunities and long-term incentive arrangements, if any.
The Committee, working with Watson, obtained public data from a peer group of 14 publicly-traded industrial manufacturing companies identified as appropriate benchmark companies for comparative compensation analysis, ranked for relevance to the Company based on the following criteria:
| | |
| 1. | Industry/product type — fluid control related companies with the same, or similar SIC codes. |
|
| 2. | Organization size — companies comparable in size based on revenue. |
|
| 3. | Location — primarily companies headquartered in the Midwest and outside of major metropolitan areas. |
The Committee reviewed the aggregate compensation of each of the peer group companies with their respective chief executive officer and chief financial officer positions and based on this review the Committee made recommendations for near-term and long-term adjustments for compensation of these
15
two Company Executive Officers. The Committee also regularly consults with executive management and periodically with outside accounting and legal advisors as appropriate in arriving at compensation recommendations subject to approval by the Board of Directors.
Philosophy and Objectives
Under the Committee’s supervision, the Company has formulated a compensation philosophy that assures the provision of fair, competitive and performance-based compensation to the Officers. The philosophy reflects the belief that compensation of the Officers should be aligned with the Company’s historical compensation, its culture, and its profitability.
The implementation of the Company’s philosophy seeks (i) to attract and retain a group of talented individuals with the education, experience, skill sets and professional presence deemed best suited for the respective Officer positions; and (ii) to continually motivate those individuals to help the Company achieve its strategic goals and enhance profitability by offering them incentive compensation in the form of profit sharing, in addition to their salaries, driven by their individual progress assessments and the Company’s results of operations.
Elements of CompensationPeriodic Reviews
TheIn devising and maintaining the Company’s Officer compensation program, is designedthe Committee from time to reward leadership, initiative, teamworktime reviews generally available published data relevant to the compensation of officers in competitor companies that manufacture pumps and top-quality performances among the Officers.related fluid control equipment. The program consists of three elements: base salary; profit sharing;Committee also regularly consults with executive management and a component of modest miscellaneous benefits. Incentive stock or option awardsperiodically with outside accounting and non-equity incentive planlegal advisors as appropriate in arriving at compensation have never been a part of the Company’s Officer compensation program. In addition, the Company has not entered into employment contracts with any of the Officers.
Although not an element of Officer compensation, ownership of the Company’s Common Sharesrecommendations, subject to approval by the Officers has continually been considered a worthy goal within the Company. The Company has paid increased dividends on its Common Shares for 37 consecutive years. Toward that end, the Company sponsors purchase opportunities, including a partial Company match, aimed at encouraging the Officers, and substantially all other employees, to voluntarily invest in the Common Shares.
Base Salary and Profit Sharing
Base salaries are premised upon the relative responsibilitiesBoard of the given Officers and industry surveys and related data. Initial salaries generally are set below competitive levels paid to comparable officers at other entities engaged in the same or similar businesses as the Company. Upon hire, actual salaries are adjusted based on performance judgments of each person’s qualifications, prior accomplishments and expected future contributions in his or her Officer role.Directors.
1612
To provide additional perspective on its internal review and feedback from other outside advisors, in 2007, following its review of the qualifications of several compensation consultants, the Committee engaged the services of Watson Wyatt Worldwide, now known as Towers Watson, an independent compensation consulting company, for a formal benchmarking review. This original review was followed by a subsequent benchmarking review in 2010 by Towers Watson (“Watson”).
The Company intentionally reliesCommittee’s initial review objectives were to establish an appropriate peer group for evaluating Officer compensation generally; complete a large degree oncompetitive assessment of pay levels for the Chief Executive Officer and Chief Financial Officer; and develop the structure of the compensation for the Chief Executive Officer and Chief Financial Officer positions including annual incentive opportunities and long-term incentive arrangements, if any. During 2010, the Committee expanded its review to include the compensation inof other corporate officer positions and the formcompensation for the Company’s Non-Employee Directors.
The Committee, working with Watson, obtained public data from a peer group of profit sharing to attract and retain the Officers. This profit sharing provides motivationpublicly-traded industrial manufacturing companies identified as applicable benchmark companies for them to performcomparative compensation analysis, ranked for relevance to the full extentCompany based on the following criteria:
| | |
| 1. | Industry/product type — fluid control related companies with the same, or similar SIC codes. |
|
| 2. | Organization size — companies comparable in size based on revenue. |
|
| 3. | Location — primarily companies headquartered in the Midwest and outside of major metropolitan areas. |
The Committee received a draft report from Watson and made several observations and recommendations regarding the selected peer group data. Watson then completed their report for their 2010 review and the Committee reviewed the compensation details of each of the peer group companies for their individual abilitiesrespective officer and as a teamBoard Non-Employee Director positions. The Committee subsequently made and reported its recommendations for near-term and long-term adjustments for compensation of each of the Company’s officer positions to build Company profitability and shareholder value on a continuing, long-term basis.the Board. The Committee also determined that Non-Employee Director compensation would not be changed during 2010.
Annual Reviews
Prior to the Company’s Annual Meeting of Shareholders, the Committee reviews with the Chief Executive Officer the recommended annual base salary for each of the Officers (other than the Chief Executive Officer). The Committee independently reviews the base salary for the Chief Executive Officer and develops a recommendation therefor. These salary reviews include consideration of updated compensation advisor data and other relevant information in arriving at the Committee’s
13
recommendations. The Committee then reports the results of its compensation reviews and recommendations to the Board of Directors.
Following the end of each year and the conclusion of the Company’s audited financial statements results, management calculates the total amount of profit sharing available for awarding to the Officers based on the Company’s achieved operating income and the award percentage determined at the beginning of the year. The Chief Executive Officer then determines a recommended allocation of the available profit sharing award pool among the Officers based on the respective Officer’s prior profit sharing award history and their current year progress assessment.
The Committee reviews with the Chief Executive Officer the recommended profit sharing award for each of the Officers (other than the Chief Executive Officer). The Committee independently reviews the profit sharing award for the Chief Executive Officer and develops a recommendation therefor. These profit sharing reviews include consideration of the Chief Executive Officer’s progress assessments of the other Officers, and the Committee’s independent progress assessment of the Chief Executive Officer. The Committee then reports the results of its profit sharing reviews and recommendations to the Board of Directors.
OtherElements of Compensation
The Company’s Officer compensation program is designed to reward leadership, initiative, teamwork and top-quality performances among the Officers. The program consists of three elements: base salary; profit sharing; and a component of modest miscellaneous benefits. Incentive stock or option awards and non-equity incentive plan compensation have never been a part of the Company’s Officer compensation program. In addition, the Company has not entered into employment contracts with any of the Officers.
Although not an element of Officer compensation, ownership of the Company’s Common Shares by the Officers has continually been considered a worthy goal within the Company. The Company has paid increased dividends on its Common Shares for 38 consecutive years and paid such quarterly dividends regularly for over 60 years. Toward that end, the Company sponsors purchase opportunities, including a partial Company match, aimed at encouraging the Officers, and substantially all other employees, to voluntarily invest in the Common Shares.
Base Salary and Profit Sharing —Base salaries are premised upon the relative responsibilities of the given Officers and industry surveys and related data. Initial salaries generally are set below competitive levels paid to comparable officers at other entities engaged in the same or similar businesses as the Company. Upon hire, actual salaries are adjusted based on performance judgments of each person’s qualifications, prior accomplishments and expected future contributions in his or her Officer role.
14
The Company intentionally relies to a large degree on incentive compensation in the form of profit sharing to attract and retain the Officers. This profit sharing provides motivation for them to perform to the full extent of their individual abilities and as a team to build Company profitability and shareholder value on a continuing, long-term basis.
Other Compensation —The Officers receive a variety of modest miscellaneous benefits, the value of which is represented for the named Executive Officers under the caption “All Other Compensation” in the Summary Compensation Table. These benefits include taxable life insurance, and Company contributions to the Christmas Savings Plan, the 401(k) Plan and the Employee Stock Purchase Plan.
17
Stock Ownership
Stock Ownership —The Company has long encouraged the Officers to voluntarily invest in the Company’s Common Shares. As a consequence, the Company makes the purchase of its Common Shares convenient, in some cases with Company cash contributions, and in all cases without brokers’ fees or commissions, under an Employee Stock Purchase Plan, a 401(k) Plan and a Dividend Reinvestment Plan. Although these plans do not constitute elements of Officer compensation, all of the current Officers are shareholders and participate in one or more of the foregoing plans.
Pension Benefits
The pension plan in which three of the Company’s Executive Officers participate is a defined benefit plan covering substantially all U.S. employees of the Company for which new entry terminated as of December 31, 2007. Effective January 1, 2008 a new and enhanced 401(k) Plan was adopted for new employees hired thereafter.
The pension plan offers participants the option to choose between monthly benefits or a single sum payment. The monthly pension benefits are equal to the product of 1.1% of final average monthly earnings (based on compensation during the final ten years of service) and the number of years of credited service. A single sum amount is equal to the present value of the final monthly pension benefit multiplied by a single premium immediate annuity rate as defined by the plan. Historically, nearly all participants in the plan elect the single sum amount at retirement. The single sum payment option is used for financial reporting purposes for the fiscal year ended December 31, 2010, computed as the plan measurement date of December 31, 2010. Actuarial assumptions used by the Company in determining the present value of the accumulated benefit amount consist of a 5% interest rate, a 5% discount rate and The IRS 2008+ Applicable Mortality Table. Base compensation in excess of $225,000 is not taken into account under the plan. Vesting occurs after five years of credited service.
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Pension Benefits Table
The table below summarizes the number of years of credited service and the present value of accumulated pension benefit for each of the named Executive Officers of the Company at December 31, 2010.
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Present Value
| | |
| | | | | | | Number of
| | of
| | Payments
|
| | | | | | | Years Credited
| | Accumulated
| | During Last
|
Name and Principal Position | | Plan Name | | Year | | Service(1) | | Benefit(2) | | Fiscal Year |
| |
| Jeffrey S. Gorman | | The Gorman-Rupp Company | | | 2010 | | | | 32 | | | $ | 689,982 | | | $ | 0 | |
| President and Chief | | Retirement Plan | | | 2009 | | | | 31 | | | | 612,785 | | | | 0 | |
| Executive Officer | | | | | 2008 | | | | 30 | | | | 505,009 | | | | 0 | |
| Wayne L. Knabel(3) | | The Gorman-Rupp Company | | | 2010 | | | | 0 | | | | 0 | | | | 0 | |
| Chief Financial Officer and | | Retirement Plan | | | 2009 | | | | 0 | | | | 0 | | | | 0 | |
| Treasurer | | | | | | | | | | | | | | | | | | |
| David P. Emmens | | The Gorman-Rupp Company | | | 2010 | | | | 13 | | | | 152,694 | | | | 0 | |
| Corporate Counsel | | Retirement Plan | | | 2009 | | | | 12 | | | | 124,109 | | | | 0 | |
| and Secretary | | | | | 2008 | | | | 11 | | | | 99,518 | | | | 0 | |
| James C.Gorman | | The Gorman-Rupp Company | | | 2010 | | | | 61 | | | | 343,115 | | | | 73,224 | |
| Chairman | | Retirement Plan | | | 2009 | | | | 60 | | | | 363,733 | | | | 73,224 | |
| | | | | | 2008 | | | | 59 | | | | 385,010 | | | | 73,224 | |
| | |
| (1) | | The credited years of service are determined as of a measurement date of December 31, 2010. |
|
| (2) | | The amount represents the actuarial present value of accumulated benefit based on a single sum payment computed as of the plan measurement date of December 31, 2010. The retirement age is assumed to be the normal retirement age of 65 as defined in the plan. |
|
| (3) | | Mr. Knabel was hired March 31, 2008, subsequent to the closing of the defined benefit pension plan to new participants effective December 31, 2007. The plan was replaced for new employees by an enhanced 401(k) plan established to replace the Company’s defined benefit plan for substantially all U.S. employees thereafter (see Note (6) to the Summary Compensation table). |
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SUMMARY COMPENSATION TABLESummary Compensation Table
The table below contains information pertaining to the annual compensation of the Company’s principal executive officer, its principal financial officer, and its other executive officers.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Change in
| | | | | | | | | | | | | | | | | | | Change in
| | | | |
| | | | | | | | | | | | | Non-
| | Pension
| | | | | | | | | | | | | | | | | Non-
| | Pension
| | | | |
| | | | | | | | | | | | | Equity
| | Value and
| | | | | | | | | | | | | | | | | Equity
| | Value and
| | | | |
| | | | | | | | | | | | | Incentive
| | Nonqualified
| | | | | | | | | | | | | | | | | Incentive
| | Nonqualified
| | | | |
| | | | | | | | | Stock
| | Option
| | Plan
| | Deferred
| | | | | | | | | | | | | Stock
| | Option
| | Plan
| | Deferred
| | All Other
| | |
Name and
| | | | | | Bonus
| | Awards
| | Awards
| | Compen-
| | Compensation
| | All Other
| | | | | | | | | Bonus
| | Awards
| | Awards
| | Compensation
| | Compensation
| | Compensation
| | |
Principal Position | | Year | | Salary | | (1) | | (2) | | (2) | | sation(2) | | Earnings(3) | | Compensation(4) | | Total | | | Year | | Salary | | (1) | | (2) | | (2) | | (2) | | Earnings(3) | | (4) | | Total |
| |
| Jeffrey S. Gorman(5) | | | 2009 | | | $ | 252,053 | | | $ | 135,000 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 107,776 | | | $ | 7,430 | | | $ | 502,259 | | | | 2010 | | | $ | 285,417 | | | $ | 174,000 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 77,197 | | | $ | 7,361 | | | $ | 543,975 | |
| President and Chief | | | 2008 | | | | 252,000 | | | | 175,000 | | | | 0 | | | | 0 | | | | 0 | | | | 56,794 | | | | 2,815 | | | | 486,609 | | | | 2009 | | | | 252,053 | | | | 135,000 | | | | 0 | | | | 0 | | | | 0 | | | �� | 107,776 | | | | 7,430 | | | | 502,259 | |
| Executive Officer | | | 2007 | | | | 204,000 | | | | 190,000 | | | | 0 | | | | 0 | | | | 0 | | | | 55,443 | | | | 6,319 | | | | 455,762 | | | | 2008 | | | | 252,000 | | | | 175,000 | | | | 0 | | | | 0 | | | | 0 | | | | 56,794 | | | | 2,815 | | | | 486,609 | |
| Wayne L. Knabel(6)(7) | | | 2009 | | | | 170,153 | | | | 85,000 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 17,495 | | | | 272,648 | | |
Chief Financial Officer
and Treasurer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Robert E. Kirkendall(8) | | | 2009 | | | | 58,838 | | | | 90,000 | | | | 0 | | | | 0 | | | | 0 | | | | 2,829 | | | | 22,397 | | | | 174,064 | | |
| Senior Vice-President | | | 2008 | | | | 169,000 | | | | 130,000 | | | | 0 | | | | 0 | | | | 0 | | | | 49,816 | | | | 7,789 | | | | 356,605 | | |
| and Chief Financial Officer | | | 2007 | | | | 145,333 | | | | 110,000 | | | | 0 | | | | 0 | | | | 0 | | | | 61,715 | | | | 6,971 | | | | 324,019 | | |
| Wayne L Knabel(6)(7) | | | | 2010 | | | | 188,333 | | | | 117,000 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 34,008 | | | | 339,341 | |
| Chief Financial Officer | | | | 2009 | | | | 170,153 | | | | 85,000 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 17,495 | | | | 272,648 | |
| and Treasurer | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| David P. Emmens(7) | | | 2009 | | | | 104,981 | | | | 45,000 | | | | 0 | | | | 0 | | | | 0 | | | | 24,591 | | | | 6,063 | | | | 180,635 | | | | 2010 | | | | 116,250 | | | | 58,000 | | | | 0 | | | | 0 | | | | 0 | | | | 28,585 | | | | 6,772 | | | | 209,607 | |
| Corporate Counsel | | | 2008 | | | | 105,000 | | | | 52,000 | | | | 0 | | | | 0 | | | | 0 | | | | 19,487 | | | | 5,873 | | | | 182,360 | | | | 2009 | | | | 104,981 | | | | 45,000 | | | | 0 | | | | 0 | | | | 0 | | | | 24,591 | | | | 6,063 | | | | 180,635 | |
| and Secretary | | | 2007 | | | | 93,333 | | | | 45,000 | | | | 0 | | | | 0 | | | | 0 | | | | 15,356 | | | | 4,608 | | | | 158,297 | | | | 2008 | | | | 105,000 | | | | 52,000 | | | | 0 | | | | 0 | | | | 0 | | | | 19,487 | | | | 5,873 | | | | 182,360 | |
| James C. Gorman(9) | | | 2009 | | | | 92,538 | | | | 12,000 | | | | 0 | | | | 0 | | | | 0 | | | | (21,277 | ) | | | 4,742 | | | | 88,003 | | |
| James C. Gorman(8) | | | | 2010 | | | | 100,000 | | | | 15,000 | | | | 0 | | | | 0 | | | | 0 | | | | (20,619 | ) | | | 4,786 | | | | 99,167 | |
| Chairman | | | 2008 | | | | 100,000 | | | | 15,000 | | | | 0 | | | | 0 | | | | 0 | | | | (29,121 | ) | | | 4,709 | | | | 90,588 | | | | 2009 | | | | 92,538 | | | | 12,000 | | | | 0 | | | | 0 | | | | 0 | | | | (21,277 | ) | | | 4,742 | | | | 88,003 | |
| | | | 2007 | | | | 100,000 | | | | 4,903 | | | | 0 | | | | 0 | | | | 0 | | | | (22,279 | ) | | | 4,704 | | | | 87,328 | | | | 2008 | | | | 100,000 | | | | 15,000 | | | | 0 | | | | 0 | | | | 0 | | | | (29,121 | ) | | | 4,709 | | | | 90,588 | |
| | |
| (1) | | The Company only provides additional profit sharing compensation as potential incentive compensation to substantially all its employees. |
| |
| (2) | | The Company has never offered incentive stock or option awards or non-equity incentive plan compensation as a part of the Company’s compensation programs. |
| |
| (3) | | The amounts reflect the non-cash change in pension value recognized for financial statement reporting purposes for the fiscal year ended December 31, 2009,2010, in accordance with SEC Release Nos.33-8732A;34-54302A. In computing the change in pension value, the Company applies the |
18
| | |
| | assumptions used for financial reporting purposes and a measurement date of December 31 for benefit plan determinations. The change in pension value is the aggregate increase in the actuarial present value of the Executive Officer’s accumulated benefit measured from the plan measurement date in 20082009 to the measurement date in 2009.2010. The Company does not offer nonqualified deferred compensation earnings to any of its employees. |
| |
| (4) | | Amounts include taxable life insurance, and Company contributions to the Company’s 401(k) Plan, Employee Stock Purchase Plan and Christmas Savings Plan. |
| |
| (5) | | Mr. J.S. Gorman’s annual salary was $275,000 for calendar yearincreased to $300,000 by the Board of Directors in July 2010. His salary was last adjusted in May 2008 and in 2009 which was not increased since May 1, 2008. Hehe took a voluntary pay reduction of 15% of his salary for over one-half of 2009the year totaling $22,947. Average pay reductions of other personnel |
17
| | |
| | during this period were 8%. His non-cash “Change in Pension Value and Nonqualified Deferred Compensation Earnings” increased in 2009 primarilyeach year due to the impactreplacement of the pension plan’s10-year compensation averaging formula replacing hisearlier lower 2000 salarycompensated years with his most recent salary. |
| |
| (6) | | Mr. Knabel was elected Chief Financial Officer and Treasurer effective May 1, 2009. Previously he was Vice President Finance following his hire March 31, 2008. His “All Other Compensation” includes $13,900 and $12,587 for calendar years 2010 and 2009, respectively, for the Company’s contributioncontributions to his account in the enhanced 401(k) plan established to replace the defined benefit plan for substantially all U.S. employees hired after December 31, 2007. Also in 2010, this amount includes $15,000 of relocation reimbursement. |
| |
| (7) | | Mr. Knabel and Mr. Emmens took voluntary pay reductions averaging 8% of their salaries for about one-half of 2009. |
| |
| (8) | | Mr. Kirkendall retired April 30, 2009. His “All Other Compensation” includes payment of $20,769 for his accrued unused vacation pay upon retirement. |
|
(9) | | Mr. J.C. Gorman’s annual salary wasis $100,000 for calendar year 2009 which washas not increased since 1998. He took a voluntary pay reduction of 15% of his salary for about one-half of 2009 totaling $7,462. Average pay reductions of other personnel during this period were 8%. |
PENSION BENEFITSDirector Compensation
The pension planNon-Employee Directors are compensated by the Company for their services as Directors. As described in which the Company’s Executive Officers participateCompensation Discussion and Analysis section above, the Compensation Committee is a defined benefit plan covering substantially allcharged with oversight and periodic review of such compensation for comparative evaluation with comparable companies and for recommending any changes to the entire Board of Directors.
Directors who are employees of the Company (Messrs. J. C. Gorman and J. S. Gorman) do not receive any compensation for which new entry terminatedservice as of December 31, 2007. Effective January 1, 2008 a new and enhanced 401(k) Plan was adopted for new employees, including Officers, hired thereafter.
The pension plan offers participants the option to choose between monthly benefits or a single sum payment. The monthly pension benefits are equal to the product of 1.1% of final average monthly earnings (based on compensation during the final ten years of service) and the number of years of credited service. A single sum amount is equal to the present value of the final monthly pension benefitDirectors.
1918
multiplied by a single premium immediate annuity rate as defined by the plan. Historically, nearly all participants in the plan elect the single sum amount at retirement. The single sum payment option is used for financial reporting purposes for the fiscal year ended December 31, 2009, computed as the plan measurement date of December 31, 2009. Actuarial assumptions used by the Company in determining the present value of the accumulated benefit amount consist of a 5.0% interest rate, a 5.6% discount rate and The 2010 IRS Funding Mortality Table. Base compensation in excess of $225,000 is not taken into account under the plan. Vesting occurs after five years of credited service.Director Compensation Table
The table below summarizes the numbertotal compensation paid for service of years of credited service and the present value of accumulated pension benefit for each of the named Executive OfficersNon-Employee Directors of the Company atfor the calendar year ended December 31, 2009.2010.
Pension Benefits
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Present Value
| | |
| | | | | | | Number of
| | of
| | Payments
|
| | | | | | | Years Credited
| | Accumulated
| | During Last
|
Name and Principal Position | | Plan Name | | | | Service(1) | | Benefit(2) | | Fiscal Year |
| |
| Jeffrey S. Gorman | | The Gorman-Rupp Company | | | 2009 | | | | 31 | | | $ | 612,785 | | | $ | 0 | |
| President and Chief | | Retirement Plan | | | 2008 | | | | 30 | | | | 505,009 | | | | 0 | |
| Executive Officer | | | | | 2007 | | | | 29 | | | | 448,215 | | | | 0 | |
| Wayne L. Knabel(3) | | The Gorman-Rupp Company | | | 2009 | | | | 0 | | | | 0 | | | | 0 | |
| Chief Financial Officer and Treasurer | | Retirement Plan | | | | | | | | | | | | | | | | |
| Robert E. Kirkendall | | The Gorman-Rupp Company | | | 2009 | | | | 31 | | | | 525,914 | | | | 44,746 | |
| Senior Vice-President and | | Retirement Plan | | | 2008 | | | | 30 | | | | 523,085 | | | | 0 | |
| Chief Financial Officer | | | | | 2007 | | | | 29 | | | | 473,269 | | | | 0 | |
| David P. Emmens | | The Gorman-Rupp Company | | | 2009 | | | | 12 | | | | 124,109 | | | | 0 | |
| Corporate Counsel | | Retirement Plan | | | 2008 | | | | 11 | | | | 99,518 | | | | 0 | |
| and Secretary | | | | | 2007 | | | | 10 | | | | 80,031 | | | | 0 | |
| James C. Gorman | | The Gorman-Rupp Company | | | 2009 | | | | 60 | | | | 363,733 | | | | 73,224 | |
| Chairman | | Retirement Plan | | | 2008 | | | | 59 | | | | 385,010 | | | | 73,224 | |
| | | | | | 2007 | | | | 58 | | | | 407,289 | | | | 73,224 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Change in
| | | | |
| | | | | | | | | | | Pension Value
| | | | |
| | | | | | | | | | | and
| | | | |
| | | | | | | | | | | Nonqualified
| | | | |
| | | Fees
| | | | | | Non-Equity
| | Deferred
| | | | |
| | | Earned or
| | Stock
| | Option
| | Incentive Plan
| | Compensation
| | All Other
| | |
| | | Paid in
| | Awards
| | Awards
| | Compensation
| | Earnings
| | Compensation
| | |
Name | | Cash(1) | | (2) | | ($) | | ($) | | ($) | | ($) | | Total |
| |
| M. Ann Harlan | | $ | 15,775 | | | $ | 12,400 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 28,175 | |
| Thomas E. Hoaglin | | | 15,850 | | | | 12,400 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 28,250 | |
| Christopher H. Lake | | | 15,775 | | | | 12,400 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 28,175 | |
| Peter B. Lake, Ph.D. | | | 17,275 | | | | 12,400 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 29,675 | |
| Rick R. Taylor | | | 15,275 | | | | 12,400 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 27,675 | |
| W. Wayne Walston | | | 19,200 | | | | 12,400 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 31,600 | |
| | |
| (1) | | The credited yearsEach Non-Employee Director receives a fee for each of service are determinedthe Board of Directors meetings attended. Fees were $2,750 for each meeting attended during 2010. Directors serving as members of Board Committees receive an additional fee of $500 for each Committee meeting attended that is held in conjunction with a measurement datemeeting of December 31, 2009.the Board of Directors. Each Committee Chairman also receives a retainer fee of $1,000 per year. In support of the Company’s management and employees, substantially all of whom underwent compensation reductions for more than six months during 2009, the Non-Employee Directors, upon recommendation of the Compensation Committee, voted unanimously on October 22, 2009 to reduce all components of Director fees by 15%. This reduction remained in effect through April 22, 2010. |
| |
| (2) | | Effective May 22, 1997, the Board of Directors adopted a Non-Employee Directors’ Compensation Plan. Under the Plan, as additional compensation for regular services to be performed as a Director, an automatic award of 500 Common Shares (from the Company’s treasury) will be made on each July 1 to each Non-Employee Director then serving on the Board. (On July 27, 2006, the Board of Directors adopted a resolution extending the Non-Employee Directors’ Compensation Plan for an additional term until the earlier of (i) May 21, 2017, (ii) at such time as all of the Company’s Common Shares authorized for award under the Plan and registered underForm S-8 Registration StatementNo. 333-30159 shall have been awarded and issued, (iii) at such time as the Company deregisters any Common Shares not issued under the foregoing Registration Statement, or (iv) at such time as the Plan is terminated by action of the Board of Directors.) The amount represents the actuarial presentaward of 500 Common Shares made on July 1, 2010 had a market value of accumulated benefit based on a single sum payment computed as of the plan measurement date of December 31, 2009. The retirement age is assumed to be the normal retirement age of 65 as defined in the plan. |
|
(3) | | Mr. Knabel was hired March 31, 2008, subsequent to the closing of the defined benefit pension plan to new participants effective December 31, 2007. The plan was replaced for such employees by an enhanced 401(k) plan established to replace the Company’s defined benefit plan for substantially all U.S. employees hired thereafter (see Note (6) to the Summary Compensation table).$12,400. |
Members of the Board of Directors are encouraged to attend the Company’s Annual Meeting of Shareholders. All Directors were in attendance at the Annual Meeting in 2010.
2019
COMPENSATION COMMITTEE REPORT
The Compensation Committee has submitted the following report to the Board of Directors:
| | |
| | (i) | The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with the Company’s management; and |
| |
| | (ii) | Based on the review and discussions referred to in the preceding paragraph, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement in connection with the 20102011 Annual Meeting of the Company’s Shareholders. |
The foregoing report has been furnished by members of the Compensation Committee.
| | | | | |
/s/ M. Ann Harlan
M. Ann Harlan | | /s/ Christopher H. Lake
Christopher H. Lake | | /s/ W. Wayne Walston
W. Wayne Walston,
Chairman | | /s/ Christopher H. Lake
Christopher H. LakeChair |
20
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth information pertaining to the beneficial ownership of the Company’s Common Shares as of February 1, 2011, except as otherwise noted, by (i) each person nominated for election as a Director, (ii) each Officer named in the summary compensation table, (iii) nominees for Director and Executive Officers of the Company as a group, and (iv) any person who is known to the Company to be a beneficial owner of more than five percent of the outstanding shares of Common Stock.
| | | | | | | | | |
| | | | | Percent of
|
| | | Amount and Nature of
| | Outstanding
|
Name and Address | | Beneficial Ownership(1) | | Shares |
| |
| Independent Director Nominees: | | | | | | | | |
| M. Ann Harlan | | | 1,150 | | | | * | |
| Thomas E. Hoaglin | | | 15,893 | (2) | | | * | |
| Christopher H. Lake | | | 38,046 | (3) | | | * | |
| Dr. Peter B. Lake | | | 22,676 | (4) | | | * | |
| Rick R. Taylor | | | 6,616 | | | | * | |
| W. Wayne Walston | | | 11,223 | (5) | | | * | |
| Named Executive Officers: | | | | | | | | |
| James C. Gorman(6) | | | 1,299,949 | (7) | | | 7.74 | % |
| Jeffrey S. Gorman(6) | | | 894,800 | (8) | | | 5.33 | % |
| David P. Emmens | | | 8,754 | | | | * | |
| Wayne L. Knabel | | | 3,095 | | | | * | |
| All Directors and Executive Officers as a group (10 persons): | | | 2,302,202 | (9) | | | 13.71 | % |
| Other Principal Beneficial Owners: | | | | | | | | |
| Pioneer Investment Management, Inc.(10)(12) | | | 1,056,596 | | | | 6.3 | % |
| 60 State Street | | | | | | | | |
| Boston, MA 02109 | | | | | | | | |
| Invesco PowerShares Capital Management(11)(12) | | | 1,047,687 | | | | 6.2 | % |
| 1555 Peachtree Street NE | | | | | | | | |
| Atlanta, GA 30309 | | | | | | | | |
| | |
| * | | Represents less than 1% of the outstanding shares. |
| | |
| (1) | | Reported in accordance with the beneficial ownership rules of the Securities and Exchange Commission under which a person is deemed to be the beneficial owner of a security if he or she |
21
| | |
| | has or shares voting power or investment power in respect of such security. Accordingly, the amounts shown in the table do not purport to represent beneficial ownership for any purpose other than compliance with the Commission’s reporting requirements. Voting power or investment power with respect to shares reflected in the table is not shared with others except as otherwise indicated. |
|
| (2) | | Includes 4,393 shares as to which Mr. Hoaglin shares voting and investment power. |
|
| (3) | | Includes 29,981 shares owned by Mr. Lake’s minor children as to which Mr. Lake considers that he shares the voting and investment power with respect thereto, but otherwise disclaims any beneficial interest therein. |
|
| (4) | | Includes 3,807 shares owned by Mrs. Lake as to which Dr. Lake shares voting and investment power. |
|
| (5) | | The amount shown in the table excludes 987 shares held in a trust of which Mr. and Mrs. Walston are co-trustees. Mr. Walston disclaims beneficial ownership of all of the shares referred to in this note (5). |
|
| (6) | | The address of these individuals is The Gorman-Rupp Company, 600 South Airport Road, Mansfield, Ohio 44903. |
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| (7) | | Includes 565,613 shares owned by Mr. Gorman’s wife and 106,390 shares held in a trust of which Mr. Gorman is a co-trustee. Mr. Gorman has a beneficial interest in 106,390 of the shares held in the trust, considers that he shares the voting and investment power with respect to all of the foregoing shares, but otherwise disclaims any beneficial interest therein. The amount shown in the table excludes 1,783,596 shares beneficially owned by members of Mr. Gorman’s immediate family and 450,956 shares held in trusts of which he and members of his family have beneficial interests. (106,390 of the shares held in trust are the same shares described above.) Mr. Gorman disclaims beneficial ownership of all of the shares referred to in this note (7). |
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| (8) | | Includes 75,668 shares owned by Mr. Gorman’s wife and 234,586 shares owned by his adult children. Mr. Gorman considers that he shares the voting and investment power with respect to all of the foregoing shares, but otherwise disclaims any beneficial interest therein. The amount shown in the table excludes 74,766 shares held in a trust in which Mr. Gorman has a beneficial interest. Mr. Gorman disclaims beneficial ownership of all of the shares referred to in this note (8). |
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| (9) | | Includes 1,043,515 shares as to which voting and investment power are shared. |
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| (10) | | Pioneer Investment Management, Inc., an investment advisory business, is an indirect subsidiary of UniCredit S.p.A. |
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| (11) | | Invesco PowerShares Capital Management LLC is a subsidiary of Invesco Ltd. |
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| (12) | | Information pertaining to the beneficial ownership of the Company’s Common Shares is as of December 31, 2010. |
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ADVISORY VOTE ON THE COMPENSATION OF THE COMPANY’S
NAMED EXECUTIVE OFFICERS
(Proposal No. 2)
This newly required proposal is for a non-binding, advisory vote to approve the compensation of the Company’s named Executive Officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named Executive Officers and the compensation philosophy, policies and practices as described in the Executive Compensation — Compensation Discussion and Analysis narrative discussion and Summary Compensation Table of this proxy statement. As detailed therein, the directors are focused on compensating the Executive Officers fairly and in a manner that promotes the Company’s compensation philosophy that compensation of the Executive Officers should be aligned with the Company’s historical compensation, its culture, and its profitability for the continued achievement of long-term shareholder value. Accordingly, the Company is asking shareholders to vote “FOR” the adoption of the following resolution:
“RESOLVED, that the shareholders of The Gorman-Rupp Company approve, on an advisory basis, the compensation of the Company’s named Executive Officers, as disclosed in the Executive Compensation -Compensation Discussion and Analysis narrative discussion and Summary Compensation Table of this 2011 Proxy Statement.”
While not binding on the Company, the Board of Directors or the Compensation Committee, the failure of the shareholders to approve the compensation of the Company’s named Executive Officers would be considered by the Board and Compensation Committee when making future compensation decisions for the Company’s named Executive Officers.
The Directors recommend a vote FOR Proposal No. 2 to approve the advisory resolution on the compensation of the Company’s named Executive Officers.
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE
COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
(Proposal No. 3)
This newly required proposal is for a non-binding, advisory vote on the frequency with which the Company will seek the non-binding advisory vote to approve the compensation of the named Executive Officers, similar and related to Proposal No. 2 above. The shareholders may vote for this advisory vote on executive compensation to be held in the future (i) every year, (ii) every two years, or (iii) every three years. Shareholders may also abstain from voting on this proposal. The Company is required to hold this advisory vote at least once every six years.
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The Company and the Board of Directors have determined that the newly-required advisory vote on executive compensation that occurs annually is the most appropriate alternative for The Gorman-Rupp Company and therefore recommends a vote for an annual advisory vote. Although the Company’s executive compensation practices have changed very little from year to year, the Board believes it is valuable for the Company’s shareholders to have an opportunity to express their opinion on a regular basis and for the Board to receive feedback.
While not binding on the Company, the Board of Directors or the Compensation Committee, the outcome of this vote will be considered by the Board and Compensation Committee when making future decisions on the frequency with which to hold an advisory vote on executive compensation.
The Directors recommend a vote FOR Proposal No. 3 to conduct future advisory votes on compensation of the named Executive Officers every year.
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal No. 2)4)
AThis proposal will be presented at the Meetingis for a vote to ratify the appointment by the Audit Review Committee of the Board of Directors of Ernst & Young LLP as independent registered public accountants for the Company during the year ending December 31, 2010.2011. Representatives of Ernst & Young LLP are expected to be present at the Meeting, will have an opportunity to make a statement if they so desire, and are expected to be available to respond to appropriate questions.
The Company paid Ernst & Young LLP the following fees in connection with the Company’s fiscal years ending December 31, 20092010 and 2008:2009:
Audit Fees — $684,500$727,500 (2010); $686,500 (2009); $726,000 (2008). Audit fees consist of the aggregate fees billed for professional services rendered for the audit of the Company’s annual financial statements and the reviews of the Company’s interim financial statements included in its quarterly reports onForm 10-Q, or services that are normally provided by the accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years. The fees paid in 20082009 and 20092010 also cover services performed in connection with the Sarbanes-Oxley Section 404 attestation and other Sarbanes-Oxley requirements.
Audit-Related Fees — $40,000$47,000 (2010); $47,000 (2009); $45,000 (2008). Audit-related fees consist of the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under the caption “Audit Fees.” The audit-related fees were paid for the following services: benefit plan audits.
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Tax Fees— $30,500 (2010); $36,700 (2009); $16,200 (2008). Tax fees consist of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning. The tax fees were paid for the following services: federal and international tax planning and advice; federal, state, local and international tax compliance; state and local tax consulting; form 5500 compliance issues; Canadian compliance issues; and other tax advice and assistance regarding statutory and regulatory matters.
All Other Fees — $0 (2009)(2010); $0 (2008)(2009). The “all other fees” category consists of the aggregate fees billed for products and services provided, other than the services reported in the foregoing three paragraphs.
Under its Charter, the Audit Review Committee is directly responsible for the oversight of the work of Ernst & Young LLP and has the sole authority to (i) appoint, retain and terminate Ernst & Young LLP, (ii) pre-approve all audit engagement fees, terms and services, and (iii) pre-approve scope and fees for any non-audit engagements with Ernst & Young LLP. The Committee exercises this authority in a manner consistent with applicable law and the rules of the Securities and Exchange Commission and the NYSE Amex Exchange, and Ernst & Young LLP reports directly to the Committee. In
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